Liberty Latin America replicating European model for new acquisitions

Chilean cable operator VTR will take on an administrative role in overseeing the future acquisitions of its parent company Liberty Latin America, including the already announced purchase of Cabletica in Costa Rica, replicating the model of its former parent, Liberty Global, in Europe.

Liberty Latin America, which consists of VTR, Cable & Wireless Communications and Liberty Puerto Rico, split off in January from Liberty Global and has said it is actively seeking an inorganic growth strategy to better position itself in the region.

The first acquisition, of 80% of Cabletica for approximately US$250mn from the Picado family, was announced in February and is still awaiting final approval in June or July.

Cabletica provides triple play services to residential customers. As of September 30, 2017, Cabletica served 207,000 customers. The company's hybrid fiber-coaxial network covers nearly 40% of homes in Costa Rica.

VTR provides average speeds of 109Mbps, while Cabletica's speeds average 7Mbps.

The Denver-based company is imagining three clusters of growth for its three operations with VTR focusing on the Southern Cone but also parts of Central America, while CWC will focus more on the Caribbean and Puerto Rico. However, this is yet to be defined, VTR CEO Guillermo Ponce told journalists over the weekend,

"What is first going to happen is that there will be an administrative center of operations for other countries," Ponce told BNamericas.

"We want to replicate the model that we have in Europe, where you have a local manager, but also a center of operations for several countries."

Ponce said that it was not yet clear where different corporate functions for the different clusters would be located.

"It's not clear where we will have the legal heads or those in charge of innovation. A lot will depend on the talent and where they want to live.

"Liberty is open in the sense that it doesn't impose geographical limitations on its employees, though there could be financial or tax reasons for locating certain parts of the business. We are analyzing that now, but it's most likely that Chile will direct the southern cone and parts of Central America."

In terms of financing, Ponce said that Liberty always deals with its acquisitions with a balance of debt and equity, though how they deal with each acquisition would depend on a case-by-case scenario, such as size, for example.

In its 1Q18 results, Liberty Latin America said it has preapproved financing of U$160mn, which it hinted could be used for purposes such as acquisitions.

"When our Q1 compliance reporting requirements have been completed, and assuming no changes from March 31, 2018 borrowing levels, we anticipate that the full amount of our unused commitments will be available to be drawn," the company said.

Ponce said that the company was studying the possible introduction in the Southern Cone of the B2B corporate business that CWC operates with its submarine cable and datacenter network.

"Everything is under analysis," he said.